Hedge fund managers see abundant opportunities in 2023, after successfully navigating a volatile environment for global markets and rough conditions in 2022 fairly well.
Bridgewater Associates LP, Westport, Conn., is "well prepared" for 2023 market conditions, said Robert Prince, co-chief investment officer, in an interview.
"Our positions in 2022 reflected higher inflation from monetary tightening in more of a move to a downturn in the economy," Mr. Prince said.
As for 2023, Mr. Prince said "we think we're entering a stagflation environment with high inflation. Central banks can't simultaneously deal with high inflation and economic growth. Banks will try to ease to create growth and tighten to bring down inflation."
However, a period of higher volatility is "a good environment for alpha generation and provides opportunities. More alpha can help to mitigate negatively correlated asset classes," Mr. Prince said.
Bridgewater managed $150 billion in assets as of Dec. 1.
Many hedge fund managers thrived amid the turmoil last year, caused by high inflation and a subsequent shift by central banks to a more hawkish stance and rising interest rates.
Among the best hedge fund strategy performers in 2022 were global macro, systematic trend and managed futures strategies, industry sources said.
What's likely in 2023 is more of the same environment as last year, said Jonathan M. Caplis, CEO of New York-based hedge fund consultant PivotalPath Inc., in an interview.
"Higher interest rates, especially on the short end of the curve, will be a tailwind for managed futures and ditto for long/short equity strategies with significant short books," he said, adding "liquidity will be valued again, with futures, macro and equity strategies benefiting."